Loading the player...

DEFINITION of 'Passive ETF'

One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.

BREAKING DOWN 'Passive ETF'

Passive ETFs are similar to unit investment trusts (UITs) in that their portfolios are reset at regular intervals. They do not generate internal capital gains like actively-managed funds. However, they differ from UITs in that they can be bought and sold on an intraday basis. Passive ETFs will typically have much lower fees than those associated with their actively-managed counterparts.

RELATED TERMS
  1. ETF Of ETFs

    An exchange-traded fund (ETF) that tracks other ETFs rather than ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Passive Investing

    Passive investing is an investment strategy that limits buying ...
  4. Index ETF

    Exchange-traded funds that follow a specific benchmark index ...
  5. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently ...
  6. Passive Management

    A style of management associated with mutual and exchange-traded ...
Related Articles
  1. Investing

    4 Reasons Most ETFs are Passively Managed

    Find out the top four reasons most ETFs are passively managed, including the benefits of lower costs, greater tax efficiency and low asset turnover.
  2. Investing

    Active vs. Passive ETF Investing

    Active or passive ETF investing? Find out which one is for you.
  3. Financial Advisor

    Active or Passive ETFs: Which is Better?

    What will be more popular in the near future: active or passive ETFs?
  4. Investing

    Want ETFs But Hate To Buy And Hold? Try Active ETFs

    Choosing between passive and active ETFs depends on your beliefs about active management's value.
  5. Investing

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  6. Investing

    Exchange-Traded Funds (ETFs)

    This vehicle combines the diversification of a mutual fund with the flexibility of a stock. Learn more about them here.
  7. Financial Advisor

    What the Future Holds for ETFs

    The popular ETF market is maturing. Here’s a look at where it may be headed as the industry moves forward.
  8. Investing

    The Benefits Of ETF Investing

    Exchange-traded funds provide unique opportunities for investors. Find out how.
RELATED FAQS
  1. What exactly is an ETF portfolio?

    Learn what exchange-traded funds (ETFs) are and their advantages to investors, what a portfolio of ETFs is, and discover ... Read Answer >>
  2. What's the difference between an index fund and an ETF?

    Learn about the difference between an index fund and an exchange-traded fund and how index fund investing compares to value ... Read Answer >>
  3. Who's in charge of managing exchange-traded funds?

    An exchange-traded fund (ETF) is a security that tracks an index but has the flexibility of trading like a stock. Just like ... Read Answer >>
  4. Should I invest in ETFs or index funds?

    Learn advantages to investing in exchange-traded funds, or ETFs, and index funds, and decide whether to include them in your ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center